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Do China’s special economic zones increase incentives to invest in R&D?

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  • Katrin Hussinger
  • Lorenzo Palladini

Abstract

China’s special economic zones (SEZs) have been established to foster business growth and innovation by improving the institutional context of specific sub-regional areas. We examine the effect of SEZs on the contribution of research and development (R&D) to the market value of firms located in these areas. The market value reflects investors’ expectations of future returns to R&D, providing crucial information for strategic investment decisions. Larger R&D contributions to the market value create stronger incentives for firms to invest in innovation. Empirical results suggest that the contribution of R&D to the market value increases through the SEZs program, particularly for R&D intensive firms. This suggests that regional policies, while increasing incentives to innovate, may widen the gap between less and more R&D intensive firms, potentially impacting competition and long-term growth.

Suggested Citation

  • Katrin Hussinger & Lorenzo Palladini, 2026. "Do China’s special economic zones increase incentives to invest in R&D?," Industry and Innovation, Taylor & Francis Journals, vol. 33(5), pages 539-565, May.
    • Handle: RePEc:taf:indinn:v:33:y:2026:i:5:p:539-565
    DOI: 10.1080/13662716.2025.2503283
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